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Mortgage Myths: Here’s Why You Don’t Need a Full 20 Percent Down Payment

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Mortgage Myths: Here's Why You Don't Need a Full 20 Percent Down Payment If you’re just getting into the real estate market, you may have heard that 20% down is the ideal percentage in order to lower your monthly payments and get your mortgage application approved. However, while 20% is often suggested, many people struggle to come up with this amount of money. If you’re staving off home ownership, here are some reasons you may not need to hold off as you long as you thought.

Minimizing Your Insurance Costs

Putting down 20% of the total purchase price of your home is often suggested, but it doesn’t definitively mean that your application won’t be approved if you don’t. If you have a good credit score and are in good financial standing, putting less than 20% down means you’ll have to pay Private Mortgage Insurance (PMI); however, it can be worth paying the extra funds in order to get into the real estate market sooner and start paying into your most significant investment.

Mortgage Programs For Less Than 20%

It may seem less possible to buy a home if you only have 5 or 7% of the purchase price, but there are many programs in the United States that enable those with limited funds to apply for a mortgage. From the Federal Housing Administration (FHA) to Fannie Mae and Freddie Mac, there are many lenders that can offer you mortgage programs that will work for your situation. While higher rates come in tandem with a lower down payment, there are options out there for those who haven’t saved quite enough.

Why Put Down 20%?

Putting down 20% is not a necessity for mortgage approval or purchasing a home, but it can be a great means of saving money in the long run and reducing your interest rates. If you’re raring to get into the real estate market and don’t want to wait for the bills to stack up, that’s OK, but if you want to hold off and save up additional funds before diving in, this can mean more money and a more solid investment in the future.

20% is often the magic number when it comes to a down payment on a home, but you don’t require this percentage of your home’s price in order to get approved for a mortgage. If you’re currently considering diving into home ownership and would like to know more about the opportunities in your area, contact your local mortgage professional for more information.

Financing That Dream Home with a Mortgage? Here’s What to Expect on Closing Day

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Financing That Dream Home with a Mortgage? Here's What to Expect on Closing DayThere are so many details that lead up to the purchase of your dream home that it can be hard to realize it when the closing day is finally upon you. However, when closing day finally arrives, there will still be a few last minute details that need to be taken care of. If you’re getting ready to solidify your home purchase and are wondering about the remaining paperwork and any unknown details, here are some things you can expect when it comes to making your purchase complete.

One Last Walk Through

A home inspection is an important part of any home purchase, but buyers often have the option to go for one final walk through on closing day in order to determine if any additional damage has been done. This will help to ensure that if any additional issues have appeared, they can be discussed and taken care of by the seller. While it might seem like the home inspection should take care of things, a last walk through can be very important in ensuring you don’t get stuck with unwanted – and potentially expensive – repairs.

A Few Helping Hands

Most of the details will be taken care of by the time closing day comes, but that doesn’t mean it will be up to the lawyers to settle everything for you and the seller. Instead, you can expect a wide cast of involved parties that can range from the seller’s agent to the title company representative to the closing agent, in addition to the homeowner and yourself. It’s just important to be aware that which parties are involved will be dependent upon where you live.

A Bevy of Documents

Purchasing a home is not without an abundance of paperwork, but there will be a few more documents to deal with during your closing meeting. In addition to documents that outline the agreement and the property transfer, there will be others like the deed of trust, the settlement statement and the mortgage note that verifies that the buyer will pay back the mortgage loan.

There are many stressors that come along with the purchase of your home, but by taking all the documents you need and being prepared to deal with all the engaged parties, the day can go a lot more smoothly. If you’re currently looking into a mortgage and are on the market for a home, contact your local mortgage professional for more information.

Understanding ‘Disposable Income’ and How This Will Impact Your Mortgage Approval

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Understanding 'Disposable Income' and How This Will Impact Your Mortgage ApprovalThere are few things more exciting than finding your ideal home, but with the rising cost of housing, a person’s dream home can often come with a very high purchase price. If you’re wondering how much home you can truly afford and how your cost of living will fare for your mortgage approval, here are some of the details on what you can expect when it comes to finding a home at an affordable price.

What Is Your Debt-to-Income Ratio?

Before deciding if a home is right for you, it’s important to calculate what your debt-to-income (DTI) ratio is to determine how much house you can afford. The debt amount will include any credit cards, existing mortgages and other loan payments that you pay down each month. To determine your maximum monthly payment, multiply your gross income by 0.36 and divide it by 12. This will give you the expenditure of debt, including your housing payment, that you should not exceed each month.

Determining Your Down Payment

There’s a lot of talk around the ideal amount you should put forward for a down payment, but this percentage can directly impact the amount of the house you can afford. If you are able to put down 20% of the purchase price of your home, this means your monthly mortgage payments will be minimized and this will decrease your DTI ratio. While a home may be out of your reach if you can only put 10 or 15% down, 20% down will ensure a higher amount of disposable income on a monthly basis, making your application more feasible.

Determine Your Lifestyle

While a lender may not reject your application outright if your debt-to-income ratio is higher than suggested, it’s important to know what kind of spending choices make sense for you so that you can make your monthly payments. If you have limited expenses above your mortgage and enjoy a Spartan lifestyle, it’s entirely possible that you’ll be able to manage a higher monthly amount. However, if you don’t have stable employment and are struggling each month, it may be a good idea to consider a less expensive property.

The monthly mortgage payment for your dream home may look like it’s manageable on the surface, but if your DTI ratio exceeds what is suggested, there may be issues with acceptance of your application. If you’re currently in the market for a new home, contact your local mortgage professionals for more information.

Can You Use a Reverse Mortgage to Buy Your Next Home? Yes, and Here’s How

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Can You Use a Reverse Mortgage to Buy Your Next Home? Yes, and Here's HowMost people who have been on the market for a home are familiar with what the term ‘mortgage’ means, but many have not heard of a reverse mortgage and aren’t aware of how this product can benefit them. If you’re nearing retirement and are contemplating a new home or even relocation to another community, here are the details on a reverse mortgage and how this option may benefit you.

What Is A Reverse Mortgage?

While many homeowners may not have the net worth to be able to buy another home without selling their current one, a reverse mortgage enables the buyer to borrow money against the value of their home. Created in 2009 as the Home Equity Conversion Mortgage for Purchase (HECM), this type of mortgage can enable those older than 62 to relocate to a new house or move closer to their family without having to sacrifice the money they’ve saved or their fixed monthly income.

What Are The Requirements?

Beyond the minimum age requirement of 62 years of age, those who would like to utilize a reverse mortgage must either own the current property they are living in or have a high amount of equity in the property. They must be able to pay all of the costs associated with ownership of the home and the property they are purchasing must be able to pass the standards held by the Federal House Administration (FHA). In addition, applicants will have to go through a financial assessment to ensure they can make insurance and property tax payments.

The Benefits And Drawbacks Of Reverse Mortgages

A reverse mortgage can be a great benefit in that it enables those who are in their senior years to purchase a new home without having to utilize a portion of their fixed monthly income. However, because a reverse mortgage includes this benefit, it also comes in tandem with a higher loan balance and this higher balance means that interest will accrue more quickly. Dependent on this amount, this can actually diminish the equity in the home.

While the opportunity for a reverse mortgage has been around for a number of years, this alternative for purchasing a home has not been utilized by many homeowners since its inception in 2009. If you’re approaching your senior years and are considering the benefits of purchasing a new home, you may want to contact your local mortgage professional for more information.

Are You Ready to Refinance Your Mortgage? Learn How to Do a Quick Refinancing Self-Assessment

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Are You Ready to Refinance Your Mortgage? Learn How to Do a Quick Refinancing Self-AssessmentWhether you’ve decided to renovate your home or you would like to consolidate your debt, refinancing your mortgage can be an option in times of money trouble; however, it’s important to know whether or not this is the right step for you. If you’ve been considering refinancing recently and are wondering how to come to a decision, here are some questions you should ask yourself before wading into the water.

Do You Have The Extra Time?

It may sound silly, but looking into the details of financing your mortgage can take up a lot of time, and if it’s going to be stressful or tax your abilities too much, you may want to hold off until things change. Because there are so many details associated with refinancing, and the security of your largest investment hangs in the balance, it’s important to have the time to research and understand all the small stuff so you don’t fall victim to a bad loan or confusing mortgage terms.

What’s My Interest Rate?

It’s entirely possible that refinancing may not be worth it if you can’t get the interest rate you’re expecting, so don’t be taken in by low rates you may have come across. Because many unreliable lenders will offer the lowest rate to get your business, it’s a good idea to do the research and go with someone you can trust. Your credit score and financial standing will have a lot to do with the rate you qualify for, but if the interest isn’t as low as you’ve calculated, it may not be a beneficial financial decision in the end.

Will This Help My Financial Situation?

No one decides to move forward with a mortgage refinancing without thinking that it’s a good financial decision, and that’s why it’s so important to carefully weigh all of the variables before deciding refinancing is for you. From a job loss to a home relocation, there are many things that come up in life that we are not always financially prepared for, so make sure to consider as many possible pros and cons as you can before moving forward with this option.

Many people think that refinancing their mortgage will improve their financial situation and eliminate their debt, but it’s important to consider all of the outcomes of this choice before coming to any final decision. If you’re currently considering refinancing, you contact your local mortgage professional for more information.